Turnbull rejects Abbott call for subsidy to keep Hazelwood open

Calls for an extraordinary government intervention to keep the ailing Hazelwood coal power plant open have been rejected by Prime Minister Malcolm Turnbull, who said its closure would not affect electricity security.

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Former prime minister Tony Abbott and the Australian Industry Group have separately suggested the 53-year-old plant – which is due to shut next week and faces hundreds of millions of dollars in WorkSafe orders – may need to be kept in operation due to concerns over whether there would be enough electricity to meet peak demand during summer.

In an opinion piece for News Corp, Mr Abbott said taxpayers should subsidise Hazelwood to keep it alive until Mr Turnbull’s proposed $2 billion expansion of the Snowy Hydro scheme comes online sometime next decade.

“If we want secure and affordable power supplies, we can’t lose the ones we currently have even if they involve burning coal,” Mr Abbott wrote.

Mr Turnbull said Hazelwood’s closure was a commercial decision taken by its majority owner, French giant Engie, and there was more than enough generation capacity to cover its loss.

“It has been slated for closure for many, many years. The company has decided to close it because the cost of making it safe – the cost of paying for the long-deferred maintenance and to meet work safety requirements – runs into many hundreds of millions of dollars, even to keep it operating after June 30,” he said.

It followed the Australian Energy Market Operator (AEMO), which runs the National Electricity Market, releasing an unusually strongly-worded statement rejecting the need for government intervention.

Released after the operator gave an update to the federal cabinet energy sub-committee on Thursday night, the statement said the closure of Hazelwood “would not compromise the security of the Victoria electricity system nor the broader National Electricity Market next summer”.

“There are power generation resources available in Victoria and the [national market] that currently are not operating at all or to their full capacity that can be made available to replace the power currently supplied by Hazelwood,” it said.

Hazelwood is Australia’s dirtiest and oldest coal plant, run on dated technology. It can provide up to a quarter of Victoria’s electricity generation but usually runs at less than full capacity.

Australian Industry Group chief executive Innes Willox has earlier called on governments to consider intervening to keep it open, warning its 60,000 members were not convinced that the risks faced by energy users during demand peaks next summer would be effectively managed.

“In the absence of convincing and appropriately sequenced alternative strategies, the state and federal governments should remain open to finding an 11th hour solution to keeping Hazelwood operating in some form,” Mr Willox said.

Industry observers said it was unlikely the group thought Hazelwood could be kept open, but was using its closure to illustrate what it sees as the severity of the situation, and hoping to prompt government action.

He said the group appreciated propping up Hazelwood would be a costly step, not least because the plant is run down and would require expensive upgrades.

“These costs need to be weighed, and fast, against the current status of efforts to secure our grid and the risks if those efforts fail … We need urgent action, and all options should be on the table,” Mr Willox said.

The Australian Industry Group is part of an unlikely coalition, spanning business, welfare and environment organisations, calling for the introduction of an emissions intensity scheme – a form of carbon trading – as part of a national policy to encourage investment in new power plants while cutting greenhouse gas emissions. The government has rejected any form of carbon trading.

Hazelwood will be the 10th coal plant across the national market to shut this decade, but Victoria has more than 2000 megawatts of fast-response gas-fired power stations designed for use at peak times operating at about 5 per cent of capacity across the past two years. There has also been a rush of investment in renewable energy in recent months.

Engie’s Australian chief, Alex Keisser, told the ABC’s Radio National it was too late to save the plant, and speculation it could stay open was hurting workers.

He said the plant was old, unsafe and uneconomic, and said Australia needed a bipartisan climate and energy policy.

Mr Turnbull said the government’s thoughts were with Hazelwood’s workers and the people of Morwell, where the plant is based, and said the government was providing support to help the community.

“It’s a very big disruption in their lives,” he said.

Victorian Energy Minister Lily D’Ambrosio said AEMO had assured the state that it was responding to market demands and there would not be energy shortfalls in Victoria.

Environment Victoria chief executive Mark Wakeham said: “The lack of coherent national policy on energy and climate change is now damaging business confidence and investment across the economy.”

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